GCU gets favorable court ruling in long battle with DOE over nonprofit status

PHOENIX – Grand Canyon University’s long battle over its nonprofit status could be nearing an end after a panel of appeals court judges issued a favorable decision last week.

In a 3-0 decision on Friday, the U.S. Court of Appeals for the Ninth Circuit ruled that the U.S. Department of Education (DOE) used the wrong legal standard when rejecting the Phoenix private school’s conversion to nonprofit status.

“It’s been remanded back to the department, and we’re now waiting for what their decision’s going to be. I would expect that they would just grant us our nonprofit status, but we’ll see,” Brian Mueller, school president, told KTAR News 92.3 FM’s The Mike Broomhead Show on Wednesday.

Mueller isn’t celebrating just yet because GCU has been locking horns with the DOE for years over whether nation’s largest Christian university should have federally recognized nonprofit status. However, he’s holding out hope that the long, expensive fight will soon be over.

What is the history of GCU-DOE dispute over nonprofit status?

GCU operated as a nonprofit institution from its founding in 1949 until 2004, when it was almost forced to close because of financial difficulties. An investor put up money to keep the school near 35th Avenue and Camelback Road afloat, which led to a period of sustained growth as a for-profit entity.

“But in 2018 we had a chance to go back as a nonprofit university, and there were very good reasons we wanted to do that: no limitations on research and grant writing, and full members of the NCAA, and no restrictions on our faculty and students,” Mueller said.

The IRS, the state of Arizona and The Higher Learning Commission all granted GCU nonprofit status.

“Everybody backed it up, except the Department of Ed would not recognize our nonprofit status. They had never done that before in the history of the Department of Education, so it was very, very unusual,” Mueller said.

As a result, the school remains unable to receive some types of federal funding that are earmarked for nonprofit institutions. In addition, the DOE status can have a negative impact on how GCU is perceived.

The university filed a lawsuit over the issue in 2021 after the parties couldn’t come to an agreement. In October 2023, GCU publicly accused federal officials retaliating for the lawsuit by unfairly targeting the school with frivolous allegations.

Later that month, the DOE’s Federal Student Aid office announced it was fining GCU a record $37.7 million for allegedly misleading graduate students about costs.

The school also became the subject of multiple federal audits after it initiated its lawsuit.

“Once we filed a complaint, the retaliation started and they opened up investigations and this and that,” Mueller said.

Is DOE targeting GCU over its ideology?

Mueller said he doesn’t have a good answer when asked why the DOE has been opposing GCU’s efforts. There has been speculation that it’s due to the school’s ideology.

“This is a Christian university. We support very traditional American values,” he said. “It’s kind of right-leaning, I guess, from a political standpoint, as far as our student body is concerned. Is that it? I don’t know. It’s very, very confusing.”

Mueller said GCU has been spending $10 million a year defending itself, money that could be better used on student services.

He said the recent election results, with Republican Donald Trump reclaiming the White House, could play into GCU’s favor if the DOE still refuses to recognize its nonprofit status and call off the dogs on the other issues.

“We are in a position now where we’ve got tremendous amounts of support in Washington, D.C., with this new administration. … One way or the other, we expect this to go away soon so we can just get back to running this university and producing 30,000 graduates on an annual basis,” he said.

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